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Vietnam's timber industry facing slow growth

Vietnam's timber industry facing slow growth

Wednesday 25, 03 2020
Many timber enterprises are facing with delays and postponement of export orders due to the effects of the Covid-19 epidemic.

Wood exports to plummet in the next three months

​According to the Vietnam Association of Wood and Forest Products, Vietnam's exports of timber and timber products to five markets that are severely affected by the epidemic will plummet in the next 3 months.

These markets account for nearly 90% of Vietnam's wood export value, including the US accounting for 50%, the EU accounting for 8%, China accounting for 12%, Japan accounting for 13% and South Korea accounting for 8%.

Partners in these markets have informed suppliers in Vietnam that they would delay the delivery time, stop buying or defer payment. Mr. Le Xuan Quan, Chairman of Nano Furniture and Architecture Joint Stock Company, Chairman of Dong Nai Association of Wood and Handicraft said that nearly all wood factories in Dong Nai have been informed to cancel orders and postpone shipments by major purchasers because they have to close stores and distribution centers.

According to Mr. Le Xuan Quan, when Covid-19 out broke in China, businesses were also wary of this problem, but did not anticipate that the market would move so quickly. Importers cannot sell, so purchasing power decreases.

Previously, workers of timber enterprises still worked overtime, but recently, their working hours have been reduced. Some factories even let workers take a leave. Under these circumstances, businesses are forced to reduce their capacity.

Vietnam's timber industry facing slow growth

Timber industry facing slow growth

According to the Vietnam Association of Wood and Forest Products, by the end of February 2020, Vietnam's exports of wood and wood products reached USD 1.578 billion, an increase of 13.8% compared to 2019, of which exports of wood products reached USD 1.137 billion, up 13.9%.

In the first two months of 2020, Vietnam's exports of wood and wood products to the US, Japan and China increased but the opposite was true for that to England (-13%), South Korea (-6%), Netherlands (-23%), and Australia (-13%).

Some items with export turnover in the first two months of 2020 decreasing are wood chips (decreased by 3%), plywood and artificial boards (decreased by 15%), sawn timber (decreased by 32%), etc.

On the contrary, in the first two months of 2020, Vietnam's imports of wood and wood products was USD 329.8 million, down 11.1% compared to 2019. Of which, round wood imports decreased by 49%, sawn lumber imports decreased by 45%, artificial boards imports (mainly from China) decreased by 26% over the same period last year.

Regarding the market, imports of timber and wood products from key markets including Malaysia, Brazil, Chile, Germany and France decreased by 28%, by 27%, by 37%, by 42 and by 9%, respectively.

The decrease of wood imports was due to the increase in domestic supply, and the Covid-19 epidemic has made some businesses cautious in importing raw materials due to fear of export difficulties.

Mr. Ngo Sy Hoai, Deputy General Secretary of the Vietnam Association of Wood and Forest Products commented that the Covid-19 epidemic in Vietnam's key timber export markets including the US, EU, South Korea, China and Japan are complicated, strongly affecting the ability to receive, distribute and consume furniture.

Some customers have suggested delayed delivery of goods on the signed orders, and payment of goods because their employees had to stop working. It is expected that the signing of new orders will be delayed from 3 to 6 months.

Regarding raw material, due to difficulties in logistics, the price of raw materials increased from 2-3 USD / m3. Some raw materials are in shortage due to supply disruptions from China, and currently there is no alternative market available.

Woodchips, which account for nearly 20% of the wood exports, are severely affected by the outbreaks in South Korea, Japan, and China, making the journey of transporting ships last a month more because of strict control of disease in both export and import ports.

Delayed delivery of goods increases the cost of warehousing, resulting in high financial costs. On the other hand, the decline in the demand for woodchip markets has reduced the price of dry woodchips by USD 5-6 per ton.

It is forecasted that the price of woodchips will continue to drop USD 3-4 per ton in the near future. “Although the export value of timber products in the first two months of 2020 increased, over the next 3-6 months, the overall export value of the industry will significantly decrease due to the impact of the Covid-19 epidemic.

Some export items will even experience strong fluctuation” said Mr. Ngo Sy Hoai. In order to remove difficulties for timber enterprises, Mr. Ngo Sy Hoai believed that authorities should reduce export tax of woodchip products from 2% to 0% till the end of 2020 to boost exports and reduce chain impact on businesses and planters.

For sawn lumber, the tax rate of 25% should be reduced to 0% in 2020. At the same time, it is proposed to defer VAT on the import of wood raw materials in order to provide financial support for enterprises, etc.

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